Glossary

Real estate lingo – explained

When you’re in the market for a new home, you might come across words, phrases and abbreviations that you’ve never heard before. We’ve compiled an extensive list of the most common terms in new home sales. By the time you’re through here, you’ll be an expert in the field!

A

Adjustable mortgage interest rate:
With an adjustable rate, both the interest rate and the mortgage payment vary, based on market conditions.

Amortization:
Length of time over which the debt will be repaid.

Appraisal:
Process for estimating the market value of a property.

Appraiser:
Certified professional who carries out an appraisal.

Appreciation:
The increase in value of something because it is worth more now than when you bought it.

Approved lender:
A lending institution designated as an approved lender by CMHC under the National Housing Act. Only Approved Lenders may qualify for CMHC Loan Insurance.

Assumption agreement:
A legal document signed by a homebuyer that requires them to assume responsibility for the obligations of a mortgage by the builder or the previous owner.

B

Bi-Level:
Also referred to as a split-level home where the floors are staggered, so that the main floor of the home is between the upper and lower floors.

Blended payment:
A mortgage payment that includes principal and interest. It is paid regularly during the term of the mortgage. The payment total remains the same, although the principal portion increases over time and the interest portion decreases.

Bridge financingA short-term loan with the confirmation of arrangement for a larger or longer-term financing. Money from the longer term financing is generally used to repay the bridge loan.

Builder:
A person or company that builds homes.

Builder/Realtor Cooperative Program:
A program that was created by the REALTORS Association of Edmonton. This program provides realtors with the opportunity to introduce and sell new homes not currently listed on the MLS System to their clients. There are important steps that the Realtors and their clients must follow to properly qualify for the program. For more information visit CHBA Edmonton Builder/Realtor Cooperative Program.

Bungalow:
A single family dwelling with all main floors living that can be detached or attached, which is either single storey and sometimes a developed basement

C

Carriage home:
A carriage, or link home, is joined by a garage or carport.

Certificate of Possession (COP):This document denotes the effective dates of your policy. When completed by the homeowner upon the final walk-through, it is returned to the Alberta New Home Warranty to facilitate the issuing of the Limited Home Warranty Policy.

Certificate of status:
Also called an Estoppel certificate, it outlines a condominium corporation’s financial and legal state. Fees may vary and may be capped by law (does not apply in Quebec).

Closed mortgage:
In some cases, a closed mortgage cannot be paid off, in whole or in part, before the end of its term. In other cases, the lender may allow for partial prepayment in the form of an increased mortgage payment or a lump sum prepayment. However, any prepayment made above stipulated allowances may incur penalty charges.

Closing costs:
Costs in addition to the purchase price of the home, such as legal fees, transfer fees and disbursements, that are payable on closing day. They range from 1.5% to 4% of a home’s selling price.

Closing day:
Date on which the sale of the property becomes final and the new owner takes title to the home.

CHBA:Canadian Home Builders Association. The Canadian Home Builders’ Association serves the interests of the home building industry at the national, provincial and local level. Activities are focused on three key areas: Achieving a stable business environment for members, protecting the interests of consumers, supporting the professionalism of our members.

CMHC:
Canada Mortgage and Housing Corporation. A Crown corporation that administers the National Housing Act for the federal government and encourages the improvement of housing and living conditions for all Canadians. CMHC also develops and sells mortgage loan insurance products.

CMHC insurance premiums:
When a home buyer takes out a mortgage loan with less than a 20% down payment, an insurance premium is paid to CMHC, and a mortgage loan insurance policy is issued to the lender. The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on a number of factors such as the purpose of the property (owner occupied or rental), the type of loan (i.e. purchase/construction or refinance loan), the ability of a self-employed borrower to supply income verification, and the size of your down payment (i.e. the higher the percentage of the total house price/value that you borrow, the higher percentage you will pay insurance premiums).

Commitment letter (or Mortgage Approval):
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Completion Mortgage:A Completion Mortgage means that the client has purchased / built their home through a New Home Builder in which full payment (or mortgage payments) isn’t required until the house is 100% completed. The client is required to make a down payment at the time of purchase. Once the house is finished and ready for occupancy the client will require funds from a mortgage to pay the builder the balance.

Compound interest:
Interest calculated on both the principal and the accrued interest.

Conditional offer:
An Offer to Purchase that is subject to specified conditions, for example, the arrangement of a mortgage. There is usually a stipulated time limit within which the specified conditions must be met.

Condition removal:After writing a purchase agreement there are conditions pending it’s finalization which are generally associated with obtaining financing. Once financing is in place conditions are removed upon the contract and it becomes legal and binding for the production of the new home to go forward.

Condominium (or strata):
You own the unit you live in (eg: highrise or lowrise, or a townhouse) and share ownership rights for the common areas of the building along with the development’s other owners.

Contractor:
A person responsible for overall construction of a home, including buying, scheduling, workmanship, and management of subcontractors and suppliers.

Conventional mortgage:
A mortgage loan up to a maximum of 80% of the lending value of the property. Typically, the lending value is the lesser of the purchase price and market value of the property. Mortgage insurance is usually not required for this type of mortgage.

Counteroffer:
If, for example, your original offer to the vendor is not accepted, the vendor may counteroffer. This means that the vendor has amended something from your original offer, such as the price or closing date. As this new offer varies the terms of the original offer, this rejects the original offer. If a counteroffer is presented, the individual has a specified amount of time to accept or reject.

Credit bureau:
A company that collects information from various sources and provides credit information on a person’s borrowing and bill paying habits to help lenders assess whether or not to lend money to the person.

Credit history or Credit Report:
The main report a lender uses to determine your creditworthiness. It includes information about your ability to handle your debt obligations and your current outstanding obligations.

Curb appeal:
How attractive the home looks from the street. A home with good curb appeal will have attractive landscaping and a well-maintained exterior.

D

Deed:
A legal document that transfers ownership in the real property to the purchaser. This is often called a “Transfer. This document is registered as evidence of ownership.

Default on payment:
Failure to make a mortgage payment in accordance with the mortgage document.

Delinquency:
Failing to make a mortgage payment on time.

Deposit:
Money placed in trust by the purchaser when an Offer to Purchase is made. The sum is held by the real estate representative or lawyer/notary until the sale is closed and then it is paid to the vendor.

Depreciation:
The decrease in value of something because it is now worth less than when you bought it.

Down payment:
The portion of the home price that is not financed by the mortgage loan. The buyer must pay the down payment from his/her own funds or other eligible sources before securing a mortgage.

Draw Mortgage:When building a house, the builder may require more upfront costs to build the home versus a completion mortgage. A payment, made periodically, to a construction contractor or subcontractor as work progresses. A draw is part of a construction mortgage.

Duplex:
A duplex is a building containing two single-family homes, located one beside the other.

E

Easement:
An interest in land owned by another person that benefits the person who has the easement, for a specific limited purpose (i.e. right of way permitting passage over a particular strip of land) such as with public utilities.

Equity:
The difference between the price for which a home could be sold and the total debts registered against it. Equity usually increases as the mortgage is reduced through regular payments. Market values and improvements to the property may also affect equity.

Estoppel certificate:
Also called a certificate of status, it is a certificate that outlines a condominium corporation’s financial and legal state. Fees may vary and may be capped by law (does not apply in Quebec).

F

Fee SimpleFee simple is absolute title to land, free of any conditions, limitations, restrictions, or other claims against the title, which one can sell or pass to another by will or inheritance. These homes don’t have condo fees and can be single family, townhome, duplexes or bungalows.

Fixed mortgage interest rate:
A locked-in rate that will not increase for the term of the mortgage.

FlexHousing™:
A housing concept that incorporates, at the design and construction stage, the ability to make future changes easily and with minimum expense, to meet the evolving needs of its occupants.

Foreclosure:
A legal process where the lender takes possession of your property and sells it to cover the unpaid debt.

Freehold :
A freehold title is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title is an interest in land that gives the holder the right to use and occupy the land and building for a defined period.

G

Gross Debt Service Ratio (GDS):
The percentage of the gross income that will be used for payments of principal, interest, taxes and heating costs (P.I.T.H.) and 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure.

Gross monthly income:
Monthly income before taxes and deductions.

H

High-ratio mortgage:
A mortgage loan higher than 80% of the lending value of the property. This type of mortgage must be insured — by CMHC or a private company, for the benefit of the approved lender, against payment default.

Home inspector:
A person who visually inspects a home to tell you if something is not working properly, or is unsafe. He or she will also tell you if repairs are needed, and maybe even where there were problems in the past.

Home owners association Fee:Not to be confused with condo fees, home owners associations are collected from residents in a subdivision for landscaping maintenance (snow shoveling and lawn care). Home owners are responsible for the upkeep of the exterior maintenance of their homes. There is no reserve fund and fees are generally lower than typical condo fees.

Household budget:
A plan that allocates income for household expenses.

I

Insurance:
Insurance provides coverage to ensure a loan is paid. See also Mortgage Loan Insurance and Mortgage Life Insurance for more details.

Insurance premium:
Payment for insurance.

Interest:
The cost of borrowing money. Interest is usually paid to the lender in regular payments along with repayment of the principal (loan amount).

Interest rate:
The price paid for the use of money borrowed from a lender.

L

Land registration:
A system to record interests in land, including the ownership and disposition of land.

Land surveyor:
A professional who can survey a property in order to provide a certificate of location.

Laned home:
A home with a rear lane access. Also see RPL.

Lawyer:
A legal advisor who is licensed to practice law and who assists people by representing them on legal matters.

Lease:Also known as renting; is a contract by which one party provides land, property, services, etc. to another for a specified time in return for an ongoing payment

Lien:
A claim against a property for money owing. A lien may be filed by a supplier or a subcontractor who has provided labour or materials but has not been paid.

Life insurance:
See Mortgage life insurance.

Link home:
A link, or carriage home, is joined by a garage or carport.

Lump sum prepayment:
An extra payment, made in lump sum, to reduce the principal balance of your mortgage, with or without penalty.

M

Manufactured home:
A factory-built, single-family home. It is transported to a chosen location, and placed onto a foundation.

Maturity date:
The last day of the term of the mortgage. On this day, the mortgage loan must either be paid in full or the agreement renewed.

Mobile home:
These are built in factories, and then taken to the place where they will be occupied. While these homes are usually placed in one location and left there permanently, they do retain the ability to be moved.

Modular home:
A factory-built, single-family home. The home is typically shipped to a location in two, or more, sections (or modules).

Mortgage:
A mortgage is a security interest given in the property you are purchasing which secures repayment of the loan related to the property. That security interest is discharged on payment of the principal and interest owning on the loan in accordance with the mortgage document. In Quebec, “mortgages” are called “hypothèques”.

Mortgage approval:
Written notification from the mortgage lender to the borrower that approves the advancement of a specified amount of mortgage funds under specified conditions.

Mortgage broker:
The job of the mortgage broker is to find you a lender with the terms and rates that will best suit you.

Mortgage life insurance:
Mortgage life insurance gives coverage for your family, if you die before your mortgage is paid off.

Mortgage lender:
A morgage lender is an institution (bank, trust company, credit union, etc.) that lends money for a mortgage.

Mortgage loan insurance:
Mortgage loan insurance is required for residential mortgage loans with a loan-to-value ratio of more than 80%, and is available from CMHC or a private company. Because mortgage loan insurance protects the lender against losses in the event that a borrower fails to pay his or her mortgage, it enables more Canadians to purchase their home earlier, at competitive interst rates and benefit from the growth in home equity sooner.

Mortgage payment:
A regular payment to the lender that includes both the interest and the principal.

Mortgage term:
Length of time that the mortgage contract conditions, including interest rate, is fixed.

MLS — Multiple Listing Service:
A multiple listing service that contains descriptions of most of the homes that are for sale. This computer-based service is used to keep up with properties that are listed for sale.

N

New Home Warranty Program:
Coverage in the event that an item under the warranty needs to be repaired within the specific warranty period. The repair will be made by the organization that provided the warranty.

Notary:
In Quebec a notary handles the legal matters related to homebuying. In most other provinces, a notary only administers oaths, certifies documents and attests to authenticity of signatures and could not, in his/her capacity as notary, advise on legal matters.

O

Offer to purchase:
A written contract setting out the terms under which the buyer agrees to buy the home. If the Offer to Purchase is accepted by the seller, it forms a legally binding contract that binds the people who signed to certain terms and conditions.

Open mortgage:
A flexible mortgage that allows you to pay part before the end of its term.

Open-house:
A period of time during which a house or apartment for sale or rent is held open for public viewing.

Operating Costs:
The expenses that a homeowner has each month to operate a home. These include property taxes, property insurance, utilities, telephone and communications charges, maintenance and repairs.

P

Payment schedule:
The monthly, biweekly, or weekly mortgage payments.

Possession walk through:On the day of your possession the builder representative will use an inspection sheet that you will be asked to sign at the end of the tour. Any items that were not addressed or are outstanding correction should be noted on the sheet as well. Once your funds are released from your lawyer keys will be presented and the home is turned over

Premium:
See CMHC Insurance Premiums.

Principal:
The amount that you borrow for a loan (not including interest).

P.I.T.H.:
Principal, interest, taxes and heating — costs used in both the Gross Debt Service ratio (GDS) and Total Debt Service ratio (TDS) calculations.

Property insurance:
Insurance that you buy for the building(s) on the land you own. This insurance should be high enough to pay for the building to be re-built if it is destroyed by fire or other hazards listed in the policy.

Property taxes:
Taxes charged by the municipality where the home is located, usually based on the value of the home. In some cases the lender will collect a monthly amount as part of the mortgage payment to cover your property taxes, which is then paid by the lender to the municipality on your behalf.

R

Real estate:
Property consisting of buildings and land.

Realtor or real estate agent:
A person who acts as an intermediary between the seller and the buyer of a property.

Reserve fund:
A fund required to be set up by the condominium corporation for major repair and replacement of common elements and assets of a corporation. This amount is set aside by the homeowner on a regular basis so that funds are available for emergency or major repairs.

Row house:
Also called a townhouse, a row house is one unit of several similar single-family homes, side-by-side, joined by common walls.

RPL:Planned Lot Residential: provides the opportunity for single family housing on smaller lots that is accessed by a rear lane. Also see Laned Home.

Pre-Occupational Walk through :Before taking possession of your home the builder representative will detail operation and maintenance with the the heating, cooling, electrical and water systems. The builder will give you manufacturers’ literature for reference, along with any warranty documents for specific equipment. Anything that requires attention should be noted for completion for the final possession walk through. Minor corrections are usually made before you move in; anything else will be dealt with afterwards as quickly as possible.

RSL:Residential Small Lot: provides the opportunity for single family housing with attached garages on smaller lots.

S

Schedule B:Paperwork that is related to adding upgrades or modification to the home

Security:
Property that is pledged to guarantee the fulfillment of an obligation and that can be claimed by a creditor if a loan is not repaid.

Single-family detached home:
Free-standing home for one family, not attached to a house on either side.

Single-family semi-detached home:
Home for one family, attached to another building on one side.

Stacked townhouse:
Two two-story homes are stacked one on top of the other. The buildings are usually attached in groups of four or more. Each unit has direct access from the outside.

Starter Home:
A two-story single family home that is built on a smaller lot and typically meets the requirements of entry-level home ownership, a preferred option for young people and families. Rohit Communities offers a variety of starter single family floor plans perfect for first time home buyers.

Stick Build:A method of home building where the house is built piece by piece at the construction site from lumber delivered to the site as opposed to pre-assembled in a factory. Both methods of builds are comparable in the industry in terms of quality construction and longevity

Strata (or condominium):
You own the unit you live in (e.g. a highrise or lowrise, or a townhouse) and share ownership rights for the common areas of the building along with the development’s other owners.

Survey or Certificate of location:
A document that shows property boundaries and measurements specifies the location of buildings, fences, and other improvements on the property and states easements or encroachments, at a specific point in time.

T

Term:
Mortgage term is the length of time that the mortgage contract conditions, including interest rate, are fixed.

Title:
A freehold title is an interest in land that gives the holder full and exclusive ownership of the land and building for an indefinite period. A leasehold title is an interest in land that gives the holder the right to use and occupy the land and building for a defined period.

Title Insurance:
Insurance against loss or damage arising from a matter affecting the title to real property (e.g.: by a defect in the title or by the existence of a lien, encumbrance or servitude).

Total Debt Service Ratio (TDS):
The percentage of gross income that will be used for payments of principal, interest, taxes and heat (P.I.T.H.) and other debt obligations, such as car payments or payments of other loans.

Townhouse:
Also called a row house, a townhouse is one unit of several similar single-family homes, side-by-side, joined by common walls.

Transfer of Warranty:If the home is still covered under Alberta New Home Warranty (five years) and the home is sold, the warranty does transfer to the new home owner.

V

Vendor take-back mortgage (Sometimes called take-back mortgage):
The vendor, not a financial institution, finances the mortgage. The title of the property is transferred to the buyer who makes mortgage payments directly to the seller.

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